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Optimal Timing of Carbon Capture Policies Under Alternative CCS Cost Functions

  • Amigues, Jean-Pierre
  • Lafforgue, Gilles
  • Moreaux, Michel

We determine the optimal exploitation time-paths of three types of perfect substitute energy resources: The first one is depletable and carbon-emitting (dirty coal), the second one is also depletable but carbon-free thanks to a carbon capture and storage (CCS) process (clean coal) and the last one is renewable and clean (solar energy). We assume that the atmospheric carbon stock cannot exceed some given ceiling. These optimal paths are considered along with alternative structures of the CCS cost function depending on whether the marginal sequestration cost depends on the flow of clean coal consumption or on its cumulated stock. In the later case, the marginal cost function can be either increasing in the stock thus revealing a scarcity effect on the storage capacity of carbon emissions, or decreasing in order to take into account some learning process. We show among others the following results: Under a stockdependent CCS cost function, the clean coal exploitation must begin at the earliest when the carbon cap is reached while it must begin before under a flow-dependent cost function. Under stock-dependent cost function with a dominant learning effect, the energy price path can evolve non-monotonically over time. When the solar cost is low enough, this last case can give rise to an unusual sequence of energy consumption along which the solar energy consumption is interrupted for some time and replaced by the clean coal exploitation. Last, the scarcity effect implies a carbon tax trajectory which is also unusual in this kind of ceiling models, its increasing part been extended for some time during the period at the ceiling.

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Paper provided by LERNA, University of Toulouse in its series LERNA Working Papers with number 12.11.368.

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Date of creation: Apr 2012
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Handle: RePEc:ler:wpaper:25948
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  1. Reyer Gerlagh & Bob van der Zwaan, 2006. "Options and Instruments for a Deep Cut in CO2 Emissions: Carbon Dioxide Capture or Renewables, Taxes or Subsidies?," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 25-48.
  2. Gilles Lafforgue & Bertrand Magne & Michel Moreaux, 2008. "Energy substitutions, climate change and carbon sinks," Working Papers 21821, Institut National de la Recherche Agronomique, France.
  3. Jean-Pierre AMIGUES & Michel MOREAUX & Katheline SCHUBERT, 2011. "Optimal Use of a Polluting non Renewable Ressource Generating Both Manageable and Catastrophic Damages," Annales d'Economie et de Statistique, ENSAE, issue 103-104, pages 107-142.
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  7. Chakravorty, Ujjayant & Leach, Andrew & Moreaux, Michel, 2010. "Would Hotelling Kill the Electric Car?," IDEI Working Papers 602, Institut d'Économie Industrielle (IDEI), Toulouse.
  8. André Grimaud & Luc Rouge, 2009. "Séquestration du carbone et politique climatique optimale," Working Papers 47300, Institut National de la Recherche Agronomique, France.
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  10. Ayong Le Kama, Alain & Fodha, Mouez & Lafforgue, Gilles, 2009. "Optimal Carbon Capture and Storage Policies," TSE Working Papers 09-095, Toulouse School of Economics (TSE).
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  12. Renaud Coulomb & Fanny Henriet, 2010. "Carbon price and optimal extraction of a polluting fossil fuel with restricted carbon capture," PSE Working Papers halshs-00564852, HAL.
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  18. repec:hal:wpaper:halshs-00564852 is not listed on IDEAS
  19. Manne, Alan & Richels, Richard, 2004. "The impact of learning-by-doing on the timing and costs of CO2 abatement," Energy Economics, Elsevier, vol. 26(4), pages 603-619, July.
  20. Snorre Kverndokk, 1994. "Depletion of Fossil Fuels and the impact of Global Warming," Discussion Papers 107, Research Department of Statistics Norway.
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